Filing Bankruptcy as a Sole-Proprietor
If a sole-proprietor files bankruptcy, their business and personal assets are treated the same – the same goes for their debts. If the sole-proprietor files Chapter 7 bankruptcy , they can discharge their unsecured debts; but won’t be forced to close their business as would be the case if they were a corporation, LLC or partnership. Sole-proprietors can also use Chapter 13 bankruptcy to repay some or all of their debts while avoiding the expense and complexity of Chapter 11 bankruptcy. But how does a sole-proprietor effectively survive their bankruptcy and continue operating in their profession after their discharge?
Below are a few tips:
- The first step to successfully exiting bankruptcy as a sole-proprietor is making sure that you keep good financial records before you file. One of the problems some sole-proprietors face is challenges to their stated income and expenses if they have not kept good records.
- Make sure that you understand what you need to operate your business during bankruptcy. Work with your Dallas bankruptcy attorney ensure that important equipment and tools associated with your profession is protected by bankruptcy exemptions. If you try to file bankruptcy pro se, protecting your professional tools could be tricky if you don’t understand the ins and outs of bankruptcy exemptions. This is why sole-proprietors are best served if they work with a professional bankruptcy attorney.
- Work with your Dallas bankruptcy attorney to ensure that clients or customers are insulated from your bankruptcy filing. By coming up with a strategy to make sure that workflow is uninterrupted and that you have the cash to purchase any necessary supplies, you can ensure that revenue remains steady throughout your bankruptcy.